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thank you very much. [applause] >> i appreciated, and i have only been here six years, but john always step in with a smile in very difficult times under the pier, supervising at the same time. just a pleasure to work with, and i wish him all the best in the future, and thank you very much. [applause] that it has been a pleasure to be here today. appreciate everybody's comments. thank you. >> thank you. >> thanks a million, honestly. we look forward to [inaudible] right? that is coming up. next, i wanted to report on the annual warm water cove park garden spring cleaning, which took place on january 22, a
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couple of weeks ago. as you probably recall, that was a collaboration between the green trust san francisco and port maintenance. a coordinated a wild flowers seating event -- seeding event. my thanks to everyone in maintenance, and particular, to our gardens staff and especially rachel and dan, who helped on the day of the event. our neighbor helped by painting up some graffiti on their fins building, and they have been doing that now for a couple of years. and trans bay cable, our tenant, took down their fencing and cleaned up along their property line, which was very helpful. donations were received from many. recology donated compost soil. is in a cafe donated coffee.
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transbay cable donated funds for the purchase of native plants. for our kraft garden center donated end of season native and drought-tolerant plants, whatever those are, and mr. and mrs. miscellaneous ice-cream donated free ice-cream for all that showed up. it was a terrific event. we see some thank you notes from the community, and the community turned out in great force, and is a wonderful place to go, so we are very pleased about that, and again, my thanks to everyone for that. >> [inaudible] >> i know. i figured as much. ok, and back. shall we move on? last week, i guess it was, on february 3, the san francisco maritime museum did a somewhat soft grand opening. you may recall that they have
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been closed for a while doing a 15 million-dollar museum and grounds for renovation. this is the san francisco quite museum out of maritime park. the museum was established in 1951, so it has been now refers. it is absolutely gorgeous, using the nicely redone, so the event last week was to promote itself to all kinds of the event planners, because it is going to take a while longer for the exhibits to be built out, so the facility is available for rental, and i have to tell you, it is going to be an amazing spot to watch anything related to the america's cup, so i think they will do very well. but if you get a chance to get in and see it, it is worth seeing. wonderful. very proud, and congratulations to them from all of us. later this week on thursday is the annual fishermans wharf merchants association dinner and silent auction. this is 8 already, so this is
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their eighth anniversary. this year, the restaurant out at the end of pier 39. it will begin at 7:00 p.m. as i said, thursday, february 10. the merchants association is honoring the family for their contributions to the rich history of fisherman's wharf. as you may recall, mr. simmons was very connected with pier 39 and very much involved in the development of pier 39, and his family currently owns and operates the restaurants, so it is a big loss to see him pass away. we look forward to remembering him. finally, a former port staffer, nick larocca passed away. he was only 64. as you may recall, it was not that long ago that he retired from the port. barely over two years. he has unfortunately move back
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to new orleans and passed away just a couple of weeks ago. he had been set for quite a while, so he was thankful receiving pretty good care once he passed. briefly, just to remind you, and expense 17 years with the board of san francisco. he managed many of our commercial maritime peers. everything from cruise ships to fishing boats, navy ships, etc. he was previously the port agent and had been a merchant marine and recently located. he was renowned for his love of lsu football, which was as alma mater, we apparently played the trumpet -- i have not heard that before -- and he was fanatical about the roman culture and loved to cook anything roman and would regale us with great meals he had cooked. and was considered a great friend by all, so we are all
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very sad to see him go, and we hope he is in a better place, and we still miss him terribly. so, wanted to let you know that he had passed on. that is it. >> is there any public comment on the executive director's report? >> item on the consent calendar. request authorization to advertise for competitive bids for the round house 2 hvac retrofit project. >> so move. >> second. >> any public comment? all in favor? the resolution has been approved. >> item 9a, requests approval of resolution to -- authorizing the port executive director to execute a memorandum of understanding with the comptroller of the city and county of san francisco to reimburse the port for revenue lost due to the hosting of the 34 america's cup and for race-
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related costs. >> good afternoon. deputy director at administration and finance. this item is a request for approval of the resolution authorizing the executive director to execute a memorandum of understanding between the city controller and port commission. 30 for the america's cup will generate significant benefits to the region. $1.4 billion of economic activity, and at least $19.5 million in additional tax revenue and 9000 jobs. early on in the city's work to secure the event, we recognize that the economic benefits would not be confined to the port but would instead accrue to the city overall. in light of the costs that would accrue to the board, the mayor's office proposed and the board of supervisors approved in principle the city's use of general fund an america's cup organizing committee to reimburse the port for lost revenue to reduce the project
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shortfall in the first phase of cruise terminal projects, and to fund the port's of the project costs. the proposed mou memorializes the agreement. it provides for the reimbursement of lost event, which, based on our estimates, will total $6.7 million over three fiscal years. the payment is structured to neutralize any effects of the america's cup on our rental revenue, while reducing for the liability. since the revenue from relocated tenants and increases in percentage rents will be a reduction in the city's payment to the board. because the mou relies on charter section b73.3.20, the payment in lieu of rent is essentially a budgetary set aside once it is approved. it provides for the new contribution to the cruise ship terminal, which i mentioned briefly. the project is also planned for
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newport debt. as previously reported, this project with a shortfall. we are picking up with dpw and other city agencies to understand the project financing plan and the context for america's cup. the proposed mou represents one avenue to address the shortfall, and it is a good start. it also provides a contingent on being further for expenses. as previously reported, we estimate there will be costs, and it states that these costs will be reimbursed, paid by private funds to the extent such funding is available. thebes acoc has pledged to -- the acoc has pledged to raise $32 million. it should be noted, and the report goes over this in some
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deep, that the payment in lieu of rent are not intended to reimburse the corp. for read lost after the event is completed, as a result of the legacy leases. these legacy leases will result in an ongoing for revenue, and will consequently reduce our debt capacity between $20,000,000.34 $0.3 million, depending on the site. we will be deploying several strategies to rebuild the debt capacity for the imported products described in the report, including additional operating expenses, programming our existing capacity to fund the most economically viable project, and also looking for other public investments. staff recommends the commission approve the attached resolution with one amendment, the final clause. please try in consultation with the city attorney. the commission secretary has provided a copy of the revised
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resolution. legally, this is a fair proposal to deliver this really important project to the region. thank you, and i'm getting answer any questions. >> is there any public comment? questions or comments? come on up. >> thank you. my name is dan chao. i'm an employee of the due to a group. some of you may be aware that it is the marine construction and dredging firm that is possible for some of the waterfront maintenance dredging. we also are pleased that we will be responsible for we bit -- rebuilding west marina, another
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city project, which ties in with the america's cup. the reason i wanted to come to the microphone is that the -- i realize the central issue is the agreement between the city and port, with respect to the issue of potential revenue loss. to a certain extent of being a contractor, we think of revenue loss in terms of down time associated with repairs and improvements, and to the extent that that is something that bears on down time, i would like to get a clarification as to what the process will be in terms of the port's review and consent of the various activities, which may lead to some of this revenue loss. i'm not sure who can come into that, but anyhow, that is my inquiry. thank you.
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>> thank you. >> did you want me to comment on that? ok. i understand the question correctly, you are asking us if we will be involved in the decisions that affect the loss of revenue to the port. the answer to that is yes. we have already been involved in the negotiation of the host city agreement. much of those revenues are from the use of port assets, which will be part of the leases for the event, or the long term development leases, if they go forward at a later date, so both the port commission will be approving those venue leases and long-term development to the extent that the charter is triggered. the board supervisors will also be approving them. i just want to underscore that what is in the staff report and
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what is contemplated by the mou -- they are approximations and/or estimates at this point in time, but there is a mechanism identified for which actual numbers would be analyzed and offset, frankly, by revenues we burned. that is there any other public comment? all in favor? resolution 1105 has been approved. >> item 9b, informational presentation of the port's proposed biennial operating budget for fiscal years 2011- 2012 and 2012-2013. >> good afternoon. this is the port's second biennial budget, and they do need to let you know that staff treated the approved budget from last year as a baseline and looked to all the news of the current year and made
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recommendations to respond to those needs. i'm going to start with describing the first year of our proposed operating budget. overall, staff is proposing modest revenue growth. a revenue budget of $2.2 million more than in the current year, and this includes $500,000 for shoreside power, which is requested in the same amount on the expenditure side. this is a lower estimate of revenue growth than our recent trend. i do have a slide that demonstrates the drivers of our revenue growth. first and foremost, parking revenue estimates resulting primarily from the parking meter stations that accept credit cards as a driver of the growth. harbor services because of a new
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lease agreement with the sf bar pilots. carter, crews, and fishing revenues have positive estimates due to the likely retention of our vessels. increased costs, and from adjustments in dockage and fishing industry events. this is offset by a reduction in the commercial industrial rents. this is a result primarily in fiscal year 2011-2012 of planned vacancies. notably, projection decreases in our base rents. increases in our percentage estimates based on current actuals, and this is really good news. it is a great trend for us to see because it is a great indicator of improved economic climate for our retail tenants, which certainly will be continued under the proposed
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34th america's cup project. >> the commercial rents make up almost 60% of revenue, and if approved by the board of supervisors, it will improve those terms to increase percentage rents above the base line to reduce the city's in lieu payment, which means revenues will remain fairly slack during the america's cup event. a final notable reaction on interest investments, based on actual interest earnings for the first half of the current year, which really reflects continued problems with economic recovery. it is only 1% based on current year yields. to address this modest revenue growth without impacting current staffing levels, management made the decision to significantly reduce funding for annual projects. to focus on implementing projects already under way and to defer or delay certain i.t. projects in particular.
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to reduce the cost of work orders to other departments to reflect actual usage, to and some one-time project, and in rare instances, to reflect a reduction in the request of work. this strategy allows us to absorb an increase in labor costs, driven almost solely by fringe benefit increases. it allowed us to fund four new critical operating positions. it allowed us to increase our debt service payments and increased projects for the $15 million i described earlier, all while achieving an operating reserves 16% of operating expenses, consistent with the 15% customers condition. as the commission is aware, the executive director and her management team have strived to limit position increases to all of those needs to address really critical operational requirements, and this budget is no exception. four new proposed positions in the operating budget -- one in engineering to address court
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wide under peer utility operation, which is critically under resourced, and the three remaining are in maintenance positions, the first to address water and sewer line breaks. the second, and maintenance planner for effective implementation for computerized maintenance management system, and as you know, the port has put a good deal of resources into the project, and we need to see it effectively implemented. we are also proposing two position substitutions to reflect actual duties and responsibilities of those positions. if i could show this. the overall sources and uses table, which is also on page two of your report, demonstrates the strategies i just described. modest revenue growth partially offset by increases to the operating expense budget, an increase to the operating reserves, $643,000, and with an
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overall result of proposed budget of $89.9 million, which is 4.5% or $3.9 million increase from the current year. the increase in the capital budget, which i will describe more in the next item, is $2.4 million, to a $13.1 million capital program, but it is primarily funded through 8 d- appropriation in the current year -- a deappropriateion in the current year. i'm going to briefly describe the second proposal. the second year certainly is more challenging for us because the revenue growth is flatter. only 453,000 or 1% to $69.5 million, and that really flat revenue growth is met with larger labor increases as a
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result of the end of the negotiated economic package consisting of 4.62% in salary reductions that will expire at the end of next year. combine with that, we have the full year of debt service for the project. we cannot deploy the same strategies that we deployed in the budget year to reduce operating expenses without significant impacts for the port, so those remaining annual project cannot be reduced much further. also, in terms of the work orders, we would need to work with other departments to negotiate those reductions because they would be reductions in service, and we are aware that the general fund is facing quite a shortfall. the operating budget facing $69.8 million or $2.9 million increase from fiscal year 2011- 2012. the proposed operating budget
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is 262 more in expenses then proposed revenue. this is a small difference and is proposed to be funded by the port's fund balance. notably, we are selling in net operating reserve. we may be able to shrink that sell our revenues are again larger than our operating expenses. following the commission's action on the february 22 notice that this is an informational items only, the budget goes to the mayor, which will then be submitted to the board of supervisors the first of may for final consideration about or on july 31. you are seeing a proposed budget that is going to be subject to change. i should let you know that this budget does not include the cost of data consolidation, which is a citywide i.t. project because those costs have not been
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developed. it also does not include proposed costs for the america's cup. it will be budgeted separately. i'm joined today now learn from their time and the other deputies to answer your questions. also, meghan of the mayor's budget office is here as well. we are here to answer any questions. >> is there any public comment on the budget? any questions? >> question. while admitting that i probably could have looked at this myself, but last year i believe is the first year we did a terribly well-year budget. i'm curious how 2011/2012 now compares to what you thought what happened last year. >> that is a very good question. i'm going to have andres go over
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more detail, but some things have changed. we have french rate increases higher than expected. we also are adding new debts to the terminal, and we cut our project more than anticipated and also a reduction in his work orders back were one-time users or to reflect the actual spend rates, so i will have andres , and give more detail. >> good afternoon. i think elaine touched on most of the things. primarily, the drivers have been a fringe benefit costs, which have been going up significantly, and also some additional costs. as we have been rolling in some new infrastructure and updating the infrastructure for a wide, there is some additional ongoing maintenance cost in there, and this year, we have actually
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included some additional changes in infrastructure because as we were going through the year, we will found that we had some issues and we need to upgrade them, so those costs were not included. we have held the costs on some of the work orders. we are going to be more aggressive on holding the line with some work order costs and trying to get the more true to actual expense. doing a quick look this afternoon, those were the major drivers between the fiscal year 2011/2012 that we presented last year and what we are presenting today. >> do you think it was a useful exercise to have done it last year? >> honestly, i think it is a useful exercise in knowing where we are headed. it was useful for me to see that the second year of this biennial budget was going to present more problems for us. it helped to really hone in on
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the strategy to balance the budget year. it is always good to know where you are headed, but it will always also be subject to change. >> since we are once again in the debt market a year ago and hope to be for the cruise ship terminal, it is very important for our investors and creditors to see where we are going. i personally found it alarming. >> thank you. i was in the meeting this morning with the mayor's office going or the budget deficit, and someone from the enterprise agencies asked the question -- why does an enterprise agency have to cut when it does not affect the general fund at all? i cannot remember the exact response, but the person that ask the question said that as every year and that was the best
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response they had ever heard. i know that we have to do our part to help the city, so the fact that we are doing more with other city departments to help ease the general fund -- i really appreciate, you for all your hard work. >> to be clear, one of those initiatives last year was project management of the cruise ship terminal, which will continue, so we still look for those opportunities, but as we cut our capital budget, they get cut as well. >> informational presentation of the port's proposed $21.7 million capital project budget funding for fiscal years 2011/2012 and 2012/2013. >> thank you. the capital budget to the -- that the port is proposing
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totals $21.66 million. $13.1 million for capital projects in fiscal year 2011/2012, and $8.55 million for capital projects in fiscal year 2012/2013. the capital budget is largely a repair and replacement budget and does not begin to address our needs, as you are well aware. we certainly could use much more, and the proposed budget allocation -- allocates our limited resources in the most efficient way possible. to ensure the sufficient resource allocation over the past several months, the capital working group has reviewed and support our project. all the project request from the division, using a new scoring criteria developed specifically for the capital plan, and you will be hearing more about this at your next meeting. overall, the criteria is intended to direct funding to project that address a safe the health code or regulatory issue,
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significantly reduce the liability to the port, promote commerce, navigation, and fisheries, promote natural and cultural resources, and leverage other sources of funds. for the first time, the two-year proposed capital budget is aligned cap -- exactly with the 10-year capital plan, and the budget before you outlines the capital projects that scored the highest. staff treated the approved 2011/12 budget as a baseline. the details of the differences from the budget approved in march last year and a proposal before you today is detailed in bit one of your report. the reasons we needed to make the changes were two primarily. the funding needed specifically for the dry dock removal for the emergency capital projects fund, emergency capital projects fund, which fell below the $500,000